Popular Deductions you can use to Save Tax (28-Oct-2010 )
POPULAR DEDUCTIONS YOU CAN USE TO SAVE TAX
Section 80C is the most popular section for tax deduction as it has the most commonly usable investment avenues which can help you save tax. (Know more about Tax Savings Under Section 80C )
However, there are other sections which may also be useful.
These sections and their deductions are given below:
- How do I save tax by buying health insurance?
Under Section 80D, if you buy health insurance (Mediclaim) for yourself, your spouse, your parents and your children, you are eligible for a deduction on the premium paid (capped at Rs. 15,000 p.a. for self, spouse and children, and Rs. 20,000 p.a. for senior citizen parents).
The health insurance premium should be paid for mediclaim for yourself (including spouse and children) and/or your parents.
Thus, you can reduce your taxable income by up to Rs. 40,000 under Sec 80D if both you and your parents qualify as senior citizens and you buy health insurance for both yourself and your parents. - If I have a handicapped relative, can I claim a deduction for medical expenses incurred by me?
Yes, under Section 80DD.
In case you have a dependent relative (spouse, children, brother, sister, parents) who is wholly or mainly dependent upon you for support, you can claim a fixed deduction of Rs. 50,000 per year, for the following:- Expenditure incurred on the dependent relative’s medical treatment (including nursing), training and rehabilitation
- Payment or deposit to specified insurance scheme under LIC or any other insurer, for maintenance of dependant handicapped relative
Also, if the dependant relative is a person with severe disability (of over 80%) then a deduction of Rs. 100,000 per annum shall be available under this section.
The handicapped dependent should be a dependent relative suffering from a permanent disability (including blindness) or mentally retarded, as certified by a specified physician or psychiatrist.
Please note: ‘Family’ as defined under this section this does not include grandparents.
Thus, Section 80DD allows for a fixed deduction of Rs. 50,000 or Rs. 1,00,000 per year depending on the health situation of the dependent relative. - Can I save tax by claiming a deduction for expenses incurred on my own medical treatment or treatment of a dependent relative?
Yes, Section 80DDB makes this allowance. A deduction to the extent of Rs. 40,000 (60,000 if senior citizen) or the amount actually paid, whichever is less, is available for expenditure actually incurred by you on yourself or on any dependent relative for medical treatment of a specified disease or ailment.
The diseases have been specified by the Income Tax Act.
You will need to furnish a certificate in form 10 (I) from any Registered Doctor working (but not necessarily regularly employed) in a government hospital.
If you have health insurance which has reimbursed part of the treatment expense, then the remaining expense can be considered as a deduction under this section.
Please note: this is applicable only for the treatment of certain diseases.
Thus, Section 80DDB allows for a deduction of up to Rs. 40,000 (or Rs. 60,000 in case of senior citizens) for medical treatment expense incurred. - I have taken an education loan. How do I save tax based on this loan?
If you have taken an education loan for graduate or post graduate studies (for any field of study – no longer limited to engineering, technology, management, applied and pure sciences) for either yourself or your spouse or child, and you are the one paying the interest on the loan, then you are eligible for a full deduction of the interest you are paying on the loan, under Section 80E.
This deduction is available to you for a maximum of 8 years, or till the interest is paid, whichever is earlier.
This is also applicable if you have taken a loan to sponsor the education of a child of whom you are the legal guardian.
Thus, Section 80E implies education. Taking an education loan for yourself, your spouse, your child or a child for whom you are the legal guardian, can help you save tax up to the amount of the interest of the loan (capped at 8 years). - I donate to certain institutions, can I save tax on these donations?
Yes, if you give to certain charitable foundations, you will save tax.
If you donate to the following institutions then either the full amount of donation, or 50% of the donation amount is deductible from your taxable income.*CHARITABLE INSTITUTIONS AMOUNT DEDUCTIBLE National Defence Fund 100% Prime Minister’s National Relief Fund 100% Prime Minister’s Armenia Earthquake Relief Fund 100% Africa (Public Contributions – India) Fund 100% National Foundation for Communal Harmony 100% Any approved university or educational institution 100% Maharashtra Chief Minister’s Relief Fund and Chief Minister’s Earthquake Relief Fund 100% Any fund set up by Gujarat State Government for providing relief to earthquake victims 100% Jawaharlal Nehru Memorial Fund 50% Prime Minister’s Drought Relief Fund 50% National Children’s Fund 50% Indira Gandhi Memorial Trust 50% Rajiv Gandhi Foundation 50% *Amount deductible is capped at not more than 10% of your gross total income, after deductions made under Sec 80C to 80U (not including Sec 80G).
There are also other charities and charitable institutions that are eligible for deduction under Section 80G. The full list is available here:
http://www.incometaxindia.gov.in/Acts/INCOME TAX Act/80g.asp - I suffer from a physical disability, can I save tax because of this?
Yes you can, under Section 80U. A deduction of Rs. 50,000 per annum is available to an individual who suffers from a physical disability (including blindness) or mental retardation. Further, if it is a severe disability i.e. more than 80% disabled, then a deduction of Rs. 100,000 per annum is available under section 80U. You will need to provide a certificate from a Government Doctor to show eligibility.
QUICK GUIDE TO TAX SAVING DEDUCTIONS
| INCOME TAX DEDUCTION | MAXIMUM DEDUCTION ALLOWED PER YEAR |
|---|---|
| SECTION 80C | |
| Life Insurance premium | Actual amount contributed / invested, up to Rs. 1 lakh |
| Contribution to Employee Provident Fund (EPF) | |
| Contribution to Public Provident Fund (PPF) | |
| National Savings Certificate (NSC) | |
| Unit Linked Insurance Plans (ULIPs) | |
| Repayment of Home Loan Principal | |
| Equity Linked Savings Schemes (ELSS) | |
| 5 Year Bank FDs | |
| Pension Funds | |
| SECTION 80CCF | |
| Long Term Infrastructure Bonds | Actual amount invested, up to Rs. 20,000 |
| SECTION 80D | |
| Mediclaim Premium for self and family | Actual premium paid, up to Rs. 40,000 (if both self and parents are senior citizens) |
| SECTION 80DD | |
| Expense on treatment of a disabled relative, or payment of insurance premium for said relative | Rs. 50,000 or Rs. 1 lakh depending on severity of disability |
| SECTION 80DDB | |
| Expenses incurred on medical treatment for yourself or for a dependent relative (not necessarily disabled) | Actual expense incurred, up to Rs. 40,000 (Up to Rs. 60,000 in case of senior citizen) |
| SECTION 80E | |
| Interest of an education loan taken for yourself, your spouse or your child | Full interest amount paid during the year, for a limit of 8 years |
| SECTION 80G | |
| Donation to certain charitable institutions | 100% or 50% of donation given, depending on the institution, subject to limitations |
| SECTION 80U | |
| Deduction in case of a disabled assessee | Rs. 50,000 or Rs. 1 lakh, depending on severity of disability |
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